To drill or not to drill? Italy has overcome the confusion
That is the question put to Italians on April 17. They were invited to a referendum to decide what to do with the 92 offshore drilling platforms, which are producing hydrocarbons in the country’s territorial water. Most platforms belong to the national energy major, Eni.
The story is a typically Italian one, where the core problem doesn’t matter much but the buzz is around the attached topics.
These offshore platforms are providing only 1% of the national oil consumption and 3% of the national natural gas consumption, or yearly 4 million barrels of oil (60% of the local production) and 2.7 billion cubic meters of gas (73% of the local production). These volumes are far from being critical for the country’s energy balance. However, it led to a major political battle.
To put it simple, the referendum had to decide if the offshore oil and gas production should go on until depletion of the deposits or it should stop at the moment when the concession expires and not be prolonged. The first expires as early as in 2018, the last in 2034.
The ideological undercover for the referendum was linked to ecological concerns. Promoters were saying that the offshore drilling might bring heavy pollution risks, especially for sandy beach resorts on the Adriatic coast. Then, they were pushing for cutting hydrocarbons from energy generation and for switching to more renewables. In 2014, the renewables amounted to 37% of the energy production in Italy, with the hydropower being its main source. However, that source is not able to produce stable volumes of electricity and is still heavily relying on subsidies.
But the biggest factor at stake was political.
The referendum was the first in Italian history organized by regional administrations. Before, such consultations were called through the procedure of a popular initiative, now some local elected bodies used the right to organize and administer it. From that perspective the vote was perceived as a tug of war between the Government in Rome and regional governors, since some of referendum’s initiators come from the same national center-left majority.
That situation was also used by foes of the Prime Minister Matteo Renzi and his team inside the governing Democratic Party. The referendum was a kind of showdown within the majority and each side wanted to score a victory.
The official parliamentary opposition, institutional and radical (“Five Star Movement”), also seized the opportunity to weaken the Government. Some were very active, others were more cautious: they have no desire to act against the powerful oil lobby and oil companies. It was very beneficial before municipal election in many important cities, due at the beginning of June 2016.
It should be also mentioned that the offshore hydrocarbon production is generating more than 11,000 direct jobs, and an estimated 140,000 indirect jobs. All involved sides, including local magnates, were keeping in mind the need to preserve employment in their electoral circumscriptions.
The battles on the eve of the referendum had a typically Italian backdrop: a magistrates’ team was investigating, in the southern region of Basilicata, on some supposed wrongdoings linked to offshore drilling. Some personalities and important companies were under scrutiny.
Promoters of the “yes” vote supporting the end of drilling had an intensive proactive campaign, pushing Italians to support their ‘green’ ideas. The goal was not only to obtain the majority at the referendum but also to mobilize the electorate. The Italian law stipulates that the referendum is valid only with an at least 50% participation.
The Government and some silent forces from the “no” camp preferred not to go publicly against the politically correct ‘green’ ideas, but simply to downsize the event, pushing voters to abstain, to stay at home on a sunny spring Sunday.
Finally, that tactics proved to be the winning one. The majority of voters (roughly 80%) supported the “yes” proposal, but the participation was of only 32%. As result, the national drilling laws stayed as they were, the Government’s interests were not damaged, but all the opponents, internal, regional and institutional, found themselves weakened as a result.
The jubilant Prime Minister seized the momentum and pushed with his reforms agenda. He started the final stage of a delicate political reform, which is aimed to basically abolish the bicameral Parliament, which is seen as one of the institutional causes of the legendary Italian political instability. The Constitution gives both chambers, the Chamber of Deputies and the Senate, elected through different mechanisms, equal rights. In the atomized multiparty system it often leads to strangely formed majorities in the Chamber, which makes it sometimes impossible to work out a coherent policy. The majority may depend only on few unpredictable votes. The proposed reform basically reduces the power of the Senate, which will become a decorative elected body. The final battle is set for the next fall.
However, during the referendum campaign the Government lost one of its important figures, Minister of Economic Development, Federica Guidi. The publication of an intercepted phone call with her boyfriend, Gianluca Gemelli, placed at the end of 2015, obliged her to quit.
On the phone, she told him that she pressed for changes in the drilling law that served his business interests by engaging with the Minister of Reforms and Relations with the Parliament, Maria Elena Boschi. The problem was that Mr. Gemelli was at that moment involved in the Basilicata investigation. His company was a contractor to the French energy major Total, extracting offshore oil there.
Mrs. Guidi was not the target of that leakage, but Mrs. Boschi, a powerful personality in the Government. She is the author and the main promoter of crucial but controversial reforms, including changes of the labor market and of the electoral system.
It should also be mentioned, in all fairness, that the safety of offshore drillings is discussed not only in Italy.
In France, in April the Minister for Ecology and Energy, Ségolène Royal, decided on a moratorium on delivering permits for hydrocarbon prospecting in French waters. She will ask partners to apply that moratorium to all the Mediterranean Sea, in the framework of the Barcelona Convention about the protection of the marine environment and the Mediterranean coast.
Before that, in January 2016, the then designed Prime Minister of Croatia, Tihomir Orešković, while presenting his Governments’ program said he would proclaim a moratorium on projects of hydrocarbon exploration and production on the Croatian coastal zone.
The views and opinions expressed in this article are those of the author and do not necessarily reflect the position of ESCP Business School.
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